Minimum wages have been in place for South Africa's one million domestic service workers since November of 2002. Using data from seven waves of the Labour Force Survey, this paper ocuments that the real wages, average monthly earnings, and total earnings of all employed domestic workers have risen since the regulations came into effect, while hours of work per week and employment have fallen. Each of these outcomes can be linked econometrically to the arrival of the minimum age regulations. The overall estimated elasticities suggest that the regulations should have reduced poverty somewhat for domestic workers, although this last conclusion is the least robust.

]]>TIPS/DPRU Forum 2005: Trade and Uneven Development – Opportunities and ChallengesFri, 13 May 2005 00:00:00 +0000Risks to Global Trade and Implications for South Africa's Economy and Policyhttp://tips.org.za/research-archive/annual-forum-papers/2005/item/405-risks-to-global-trade-and-implications-for-south-africa-s-economy-and-policy
http://tips.org.za/research-archive/annual-forum-papers/2005/item/405-risks-to-global-trade-and-implications-for-south-africa-s-economy-and-policy

The past two decades have witnessed an unprecedented globalisation of trade in goods and services. This process has been driven, inter alia, by technology, ideology and the availability of relatively cheap energy. By extrapolating this trend, one may expect further integration of world markets and increasingly unhindered international trade. However, there is mounting evidence of significant risks to the globalisation of free trade, at least in goods and possibly in certain services as well. Three main risk areas are identified: (1) fossil fuel depletion, in particular a possible peak in world oil production within the next five to ten years; (2) climate change, and especially its effect on agricultural production; (3) and instability in the world financial system caused primarily by the US's unsustainable twin deficits. The paper explores some possible implications of these risks for the South African economy and its foreign trade in particular. It argues that South Africa's trade policy should take due cognizance of these threats to global trade, and advocates adaptation and mitigation strategies designed to improve self-sufficiency and to protect the poor in sensitive areas, especially food and energy security.

]]>TIPS/DPRU Forum 2005: Trade and Uneven Development – Opportunities and ChallengesFri, 13 May 2005 00:00:00 +0000Co-Movement Between South Africa and SADC: Is Trade a Predominant Factor?http://tips.org.za/research-archive/annual-forum-papers/2005/item/406-co-movement-between-south-africa-and-sadc-is-trade-a-predominant-factor
http://tips.org.za/research-archive/annual-forum-papers/2005/item/406-co-movement-between-south-africa-and-sadc-is-trade-a-predominant-factor

This paper uses a novel dynamic factor modelÂ a laÂ Forni et al. (2003) to investigate the impact of increasing trade on the co-movement of the business cycle between South Africa and the Southern African Development Community (SADC) countries. The results show a moderate but increasing synchronization between South Africa and SADC countries, in contrast with the already existing high correlation between the South African business cycle with the G-7 countries and most emerging market countries. This is evidence of the increasing importance and spread of the forces of globalization, reflected in the increasing integration of goods and services through international trade. The striking result is that South Africa, justified by its geographical location and increased trade integration in the SADC, cannot isolate itself from its SADC neighbours, and that regional policy coordination is of the utmost importance.

]]>TIPS/DPRU Forum 2005: Trade and Uneven Development – Opportunities and ChallengesFri, 13 May 2005 00:00:00 +0000Unpacking the Nature of Demand and Supply Relationships in the Mining Capital Goods and Services Cluster: The Case of PGMshttp://tips.org.za/research-archive/annual-forum-papers/2005/item/407-unpacking-the-nature-of-demand-and-supply-relationships-in-the-mining-capital-goods-and-services-cluster-the-case-of-pgms
http://tips.org.za/research-archive/annual-forum-papers/2005/item/407-unpacking-the-nature-of-demand-and-supply-relationships-in-the-mining-capital-goods-and-services-cluster-the-case-of-pgms

South African policy makers and industrial planners are centrally concerned with identifying strategies and programmes that maximise and broaden the economic linkages that naturally arise from the need to extract, process and refine the country's mineral resources (DST, 2002; DTI, 2002). At an industry level these linkages encompass 'downstream' (beneficiation) activities, 'backward' linkages (the supply sector), and 'lateral' linkages (arising from the modification and application of generic technologies to other industry sectors). While the need to increase the level of value added/beneficiation to primary resources prior to export has received a considerable amount of attention in recent years (see Jourdan, 1992; Baxter, 1994; RSA, 1998; Chamber of Mines, 2000; MMSDsa, 2002, Metcalfe, 2003), there is a relative paucity of studies that explore the backward linkages arising from the mining sector.

The study applies an augmented gravity equation to South Africa's exports of motor vehicles, parts & accessories (SIC 381-383) to 76 countries over the period 1994 to 2003. The study employs a dynamic panel data model to estimate long-run and short-run coefficients. First, it is shown that it takes about 16 months for exports to adjust. Second, a number of variables, namely, importer income, population, exchange rate, distance, free trade agreements are important determinants of bilateral trade flows for motor vehicles, parts & accessories. Third, the gravity model is solved stochastically to determine South Africa's optimistic, pessimistic and average potential exports to the 76 countries. Finally, estimates of the degree of variability of average potential exports are provided, which show that South Africa's trade with Germany, the United Kingdom and the United States have low variability.

This paper investigates whether African manufacturing exporters are more productive than non-exporters and whether these productivity differences precede entry into the export market. We find at expoters are more productive but that productivity does not matter for entry into t export market - suggesting that learning by exporting is important. We investigate the nature this relationship and find that exporters donot have higher rates of productiity growth than non-exporters.

The current implementation of a free trade area in SADC has given rise to concerns that the present location of industry in the region will be adversely affected. Specifically, many of the smaller and less-developed countries fear that this change will result in a loss of their industry towards the more developed members, and particularly towards South Africa. The paper conducts a review of the spatial distribution of industry within SADC from 1970 to 1999. This is achieved through the calculation and examination of industrial locational Gini coefficients, measuring the relative degree of concentration of 28 ISIC (rev 2) industries for the years 1970, 1980, 1985, 1990, 1995 and 1999. The analysis, however, is focused on the most recent two decades.

The average level of concentration within SADC is found to increase steadily from 1970 to 1990. Between 1990 and 1995, the level of concentration increases further, but at a lower rate, and, by 1999 industry begins to disperse. The Gini coefficient is a relative measure, and thus does not measure the absolute level of concentration. Thus, much of the increase in concentration seen is towards peripheral countries. To further interpret the Gini, the changes in concentration are compared to the absolute changes in manufacturing employment in South Africa. From this analysis there appears to be a distinct advantage for industry as a whole to locate in South Africa versus SADC as a whole. However, this is not the case for all industries as eight of the 28 industries analysed show particular tendencies to concentrate in the periphery (i.e. SADC excluding South Africa). Additionally, there are individual countries in addition to South Africa that appear to have a revealed comparative advantage in many of the other industries. Two main policy recommendations result from the paper. Firstly, individual countries in SADC need to promote those industries that show concentration tendencies in their country, and investigate further reasons as to why other industries tend to locate in South Africa. Secondly, further study should be undertaken on the effect of reducing transport costs on specific industries.

This paper examines the characteristics of short-term fluctuations/volatility of the South African exchange rate and investigates whether this volatility has affected the South Africa's exports flows. In particular the paper investigates the impact of exchange rate volatility on aggregate South African exports flows to the rest of the world, as well as on South African goods, services and gold exports. The ARDL bounds testing procedures developed by Pesaran et al. (2001) were employed on quarterly data for the period 1984 to 2004. The results suggest that, depending on the measure of volatility used, either there exist no statistically significant relationship between South African exports flows and exchange rate volatility or when a significant relationship exists, it is positive. No evidence of a long run gold and services exports demand relations were found. These results are however not robust as they show great amount of sensitivity to different definitions of variables used.

]]>TIPS/DPRU Forum 2005: Trade and Uneven Development – Opportunities and ChallengesFri, 13 May 2005 00:00:00 +0000Who Replies in Brackets and What are the Implications for Earnings Estimates? An Analysis of Earnings Data from South Africahttp://tips.org.za/research-archive/annual-forum-papers/2005/item/412-who-replies-in-brackets-and-what-are-the-implications-for-earnings-estimates-an-analysis-of-earnings-data-from-south-africa
http://tips.org.za/research-archive/annual-forum-papers/2005/item/412-who-replies-in-brackets-and-what-are-the-implications-for-earnings-estimates-an-analysis-of-earnings-data-from-south-africa

In household surveys, earnings data typically can be reported as point values, in brackets or as 'missing'. In this paper we consider South African household survey data that contain these three sets of responses. In particular, we examine whether there are systematic differences between the sample of the employed with earnings reported as point values and those with earnings responses in brackets; we compare five different methods of reconciling bracket and point responses so as to generate descriptive measures of earnings; and we investigate empirically how earnings measures differ by approach.

]]>TIPS/DPRU Forum 2005: Trade and Uneven Development – Opportunities and ChallengesFri, 13 May 2005 00:00:00 +0000The Significance of Product Development to Firm Competitiveness: A Case of Plastic Product Firms in Ekurhulenihttp://tips.org.za/research-archive/annual-forum-papers/2005/item/413-the-significance-of-product-development-to-firm-competitiveness-a-case-of-plastic-product-firms-in-ekurhuleni
http://tips.org.za/research-archive/annual-forum-papers/2005/item/413-the-significance-of-product-development-to-firm-competitiveness-a-case-of-plastic-product-firms-in-ekurhuleni

Understanding firm competitiveness and product development is crucial to industrial development. The plastics sector provides a good case in which to explore these issues. The plastics sector has been one of the better performing sectors in recent years in terms of output and employment. Plastic products are increasingly replacing metal products, thus placing the plastics sector at the core of manufacturing. There are constant developments related to the properties of materials such as rigidity, colour and flammability. Hence it is vital for firms to adapt, combine and develop capabilities to establish new products and markets. These factors require downstream firms to align their technological capabilities and dynamics to meet such sector specific and international challenges. The paper assessed different dimensions of firms competitiveness and capabilities, including technological capabilities, investment decisions and skills development. It finds that the firms that are engaging product development and industrial restructuring through upgrading or re-organisation of their production processes tend to be more competitive and were growing. The paper also highlights actions required in order to upgrade and re-organise production processes, including appropriate government policies.